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The Structure of Hiring Costs in Germany: Evidence from Firm-Level Data

  • Mühlemann, Samuel

    ()

    (University of Munich)

  • Pfeifer, Harald

    ()

    (BIBB)

This paper analyzes the structure of hiring costs of skilled workers in Germany. Using detailed and representative firm-level data on recruitment and adaptation costs of new hires, we find that average hiring costs amount to more than 8 weeks of wage payments (4,700 Euros). The structure of hiring costs is convex, as an increase in the number of hires by 1% increases hiring costs by 1.3%. We find moderate effects of labor market institutions on the magnitude but none on the structure of hiring costs. Furthermore, we provide evidence in favor of monopsony power in the German labor market.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7656.

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Length: 37 pages
Date of creation: Sep 2013
Date of revision:
Publication status: forthcoming in: Industrial Relations
Handle: RePEc:iza:izadps:dp7656
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  1. John M. Abowd & Francis Kramarz, 1997. "The Costs of Hiring and Separations," NBER Working Papers 6110, National Bureau of Economic Research, Inc.
  2. Marc Blatter & Samuel Muehlemann & Samuel Schenker, 2008. "The Costs of Hiring Skilled Workers," Economics of Education Working Paper Series 0015, University of Zurich, Institute for Strategy and Business Economics (ISU), revised Nov 2009.
  3. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
  4. John T. Addison & Paulino Teixeira & Thomas Zwick, 2008. "German Works Councils and the Anatomy of Wages," Working Paper Series 11-08, The Rimini Centre for Economic Analysis, revised Jan 2008.
  5. Addison, John T. & Schnabel, Claus & Wagner, Joachim, 2003. "The course of research into the economic consequences of German works councils," Discussion Papers 22, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  6. Kramarz, Francis & Michaud, Marie-Laure, 2004. "The Shape of Hiring and Separation Costs," IZA Discussion Papers 1170, Institute for the Study of Labor (IZA).
  7. Alan Manning, 2010. "Imperfect competition in the labour market," LSE Research Online Documents on Economics 28729, London School of Economics and Political Science, LSE Library.
  8. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  9. Kramarz, Francis & Michaud, Marie-Laure, 2010. "The shape of hiring and separation costs in France," Labour Economics, Elsevier, vol. 17(1), pages 27-37, January.
  10. Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 3-26, Summer.
  11. Russell W. Cooper & Jonathan Willis, 2003. "The Cost of Labor Adjustment: Inferences from the Gap," NBER Working Papers 10006, National Bureau of Economic Research, Inc.
  12. Rinne, Ulf & Zimmermann, Klaus F., 2011. "Another Economic Miracle? The German Labor Market and the Great Recession," IZA Discussion Papers 6250, Institute for the Study of Labor (IZA).
  13. Christopher A. Pissarides, 2007. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," CEP Discussion Papers dp0839, Centre for Economic Performance, LSE.
  14. Yashiv, E., 1999. "Hiring as Investment Behavior," Papers 35-99, Tel Aviv.
  15. Knut Gerlach & Gesine Stephan, 2008. "A Note on Job Tenure and Collective Contracts," LABOUR, CEIS, vol. 22(1), pages 167-183, 03.
  16. Dube, Arindrajit & Freeman, Eric & Reich, Michael, 2010. "Employee Replacement Costs," Institute for Research on Labor and Employment, Working Paper Series qt7kc29981, Institute of Industrial Relations, UC Berkeley.
  17. Carola M. Frege, 2002. "A Critical Assessment of the Theoretical and Empirical Research on German Works Councils," British Journal of Industrial Relations, London School of Economics, vol. 40(2), pages 221-248, 06.
  18. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March.
  19. Dube, Arindrajit & Lester, T. William & Reich, Michael, 2013. "Minimum Wage Shocks, Employment Flows and Labor Market Frictions," Institute for Research on Labor and Employment, Working Paper Series qt27z0006g, Institute of Industrial Relations, UC Berkeley.
  20. Uwe Jirjahn, 2010. "Works councils and employment growth in German establishments," Cambridge Journal of Economics, Oxford University Press, vol. 34(3), pages 475-500.
  21. Hirsch, Boris & Schank, Thorsten & Schnabel, Claus, 2009. "Works Councils and Separations: Voice, Monopoly, and Insurance Effects," IZA Discussion Papers 4126, Institute for the Study of Labor (IZA).
  22. Alan Manning, 2006. "A Generalised Model of Monopsony," Economic Journal, Royal Economic Society, vol. 116(508), pages 84-100, 01.
  23. Karl BRENKE & Ulf RINNE & Klaus F. ZIMMERMANN, 2013. "Short-time work: The German answer to the Great Recession," International Labour Review, International Labour Organization, vol. 152(2), pages 287-305, 06.
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